Report Industry Investment Rating No relevant information provided. Core Viewpoints - The Chinese property market shows signs of slight improvement, with the decline in contracted sales in 9M25 narrowing compared to 8M25, and more developers reporting year - on - year increases in September 2025. However, overall sales are still down significantly year - on - year [8][9][10]. - China's social financing flow beat market expectations, but its growth remained weak, and government bond issuance slowed down. Credit demand in the real economy was subdued, and the central bank is likely to maintain ample liquidity and support credit growth with expected cuts in LPR and RRR in 4Q25 [4][12][13]. - China's CPI marginally recovered due to a rebound in food prices, core CPI rose, and PPI narrowed its contraction. Demand - side stimulus and supply - side restructuring are needed to support economic recovery, and a policy easing window is expected in 4Q25 [17][18][19]. Summary by Directory Trading Desk Comments - Yesterday, spreads of some bonds tightened or widened, such as KEBHNB Float 28/KEBHNB 30 tightening 3 - 5bps, KOROIL/HYUELE/HYNMTR belly bonds tightening 1 - 3bps, and PKX widening 1 - 2bps. Japanese AT1s and insurance hybrids firmed, while UBS bonds faced selling [2]. - In Greater China, higher - beta credits like NWDEVLs rose, MTRC perps increased, and some names in Macau gaming also went up. However, LASUDE 26 lost points, and some Chinese property bonds had price changes [2]. - This morning, Asia IG names were 1 - 2bps wider overall, and some bonds like VNKRLE 29/IHFLIN 28/FAEACO 12.814 Perp increased in price, while others decreased [4]. Chinese Properties - In 9M25, the contracted sales of 31 developers dropped 18.5% year - on - year to RMB1,285.6bn. Only 2 state - owned developers reported year - on - year increases, while several others had significant declines [9]. - In September 2025, 31 developers reported contracted sales of RMB136.3bn, a 9.9% year - on - year decrease from RMB151.3bn in September 2024. Nine out of 31 developers reported year - on - year increases in contracted sales, up from 4 in August 2025 [8]. China Economy Credit Weakness with Liquidity Easing - Social financing flows beat market expectations, but outstanding social financing growth edged down to 8.7% in September from 8.8% in August. Government bond issuance contracted, and corporate bond issuance continued to recover [13]. - New RMB loans remained subdued, with growth of outstanding RMB loans edging down to 6.6% in September. Credit demand in the household and corporate sectors was weak [14]. - The central bank is likely to maintain ample liquidity and support credit growth, with expected 10 bps LPR cut and 50 bps RRR cut in 4Q25 [16]. Mild Reflation in Upstream Sectors - China's CPI YoY recovered to - 0.3% in September from - 0.4% in August, and core CPI rose to 1% YoY, the highest since early 2024, indicating a gradual recovery in consumer demand [19][20]. - PPI's year - on - year contraction narrowed to - 2.3% in September from - 2.9%, mainly driven by the rebound in the mining sector, while downstream consumer goods remained subdued [21]. - Policy easing is expected in 4Q25, including a 10bps LPR cut, 50bps RRR cut, and expanding fiscal stimulus towards consumption and the property market [18][23]. Offshore Asia New Issues - Newly priced issues include BOSC International Investment Ltd (USD60mn, 3M, 4.12% coupon), China Water Affairs (USD150mn, 5NC3, 5.875% coupon), and Chengdu Sino French Ecological (USD100mn, 3yr, 4.3% coupon) [25]. - There are no offshore Asia new issues in the pipeline today [26]. News and Market Color - There were 107 credit bonds issued onshore yesterday with an amount of RMB88bn, and month - to - date, 395 credit bonds were issued with a total amount of RMB457bn, a 35.8% year - on - year increase [27]. - Various corporate news, such as BHP considering reviving copper mines, BOCOM redeeming bonds, and CIFIHG unveiling debt restructuring terms [27].

Index Performance - The Hang Seng Index (HSI) closed at 26,388, reflecting a 1.2% increase for the day and a 31.5% increase year-to-date [1] - The Hang Seng China Enterprises Index (HSCEI) closed at 9,365, with a 1.1% daily increase and a 28.5% year-to-date increase [1] - The MSCI China index showed a 1.3% increase for the day and a 34.7% increase year-to-date, closing at 87 [1] Commodity Price Performance - Brent Crude oil closed at $67 per barrel, with a 0.9% increase for the day but a 7.0% decrease year-to-date [2] - Gold prices reached $3,643 per ounce, marking a 0.2% increase for the day and a significant 38.8% increase year-to-date [2] - The Baltic Dry Index (BDI) increased by 111.7% year-to-date, closing at 2,111 [2] Key Macro and Earnings Releases - The US Empire State Manufacturing Index reported an actual value of 11.9, exceeding the consensus of 4.9 [3] - The US Import Price Index showed a year-over-year change of -0.2%, against a consensus of 0.0% [3] - The Federal Funds Target Rate in the US was reported at 4.5%, higher than the consensus of 4.3% [3] China Internet Sector - Six key factors influencing the financials and valuations of China Internet companies in the next 6-12 months include AI, macro recovery, competition landscape, regulatory environments, shareholder return executions, and US-China tensions [8][10] - The ranking of sub-industries is as follows: cloud > online music = online game = online advertising > eCommerce > others [8][10] - Tencent, Alibaba, Netease, and TME are identified as mid- to long-term top picks, while Bilibili and Baidu are recommended for short-term investment [9][10] Auto Sector Update - The "Work Plan for Stable Growth in the Automotive Industry (2025–26)" outlines 15 key initiatives aimed at expanding domestic consumption and enhancing supply quality [14][17] - The new plan emphasizes industry scale expansion and quality improvements, contrasting with the previous plan's focus on maintaining operations within a reasonable range [15][17] - Geely Automobile is favored for its market share gains, while NIO is expected to see a rerating due to operational improvements [16][18] Social Financing in China - The growth of outstanding social financing in China moderated from 9% in July to 8.8% in August, attributed to weakened government bond financing and subdued new loans [5][7] - Despite sluggish household consumption credits and mortgage loans, there is an increasing trend in household stock investment as savings have declined over the past two months [5][7] - Future growth in social financing is expected to stabilize with the advance of next year's bond issue quota for local government hidden debt replacement [6][7] Domestic AI Server Market - The domestic AI server market is projected to grow at 40% due to high demand for AI and uncertainties in Nvidia GPU supply [12][13] - Huawei, Cambircon, and Kunlunxin are ranked as the top three domestic AI platforms based on product competitiveness and supply stability [12][13] - There are concerns about oversupply risks in smaller computing clusters due to lack of economies of scale and inadequate technical support [12][13]

Core Insights - The central point of the article is the significant increase in government bond financing in July, which has contributed to the overall growth in social financing, with a net financing of 8.9 trillion yuan in the first seven months, an increase of 4.88 trillion yuan year-on-year [1] Group 1: Government Bond Financing - In July, the issuance of special bonds saw a substantial year-on-year increase, leading to a rise in government bond financing by 555.9 billion yuan [1] - Analysts suggest that government bond issuance will continue to support social financing in the second half of the year, although the pace may gradually slow down due to remaining quota considerations [1] Group 2: Impact on Loan Data - The impact of local government bond replacement on loan data remains significant, with an estimated 2.6 trillion yuan of refinancing special bonds used for debt repayment, affecting loan growth by approximately 1 percentage point [1] - After adjusting for the impact of debt repayment, the year-on-year loan growth rate in July is close to 8%, indicating a relatively strong level [1] Group 3: Long-term Implications - Long-term, local debt replacement is expected to facilitate risk clearance and financial stability, allowing for more local financial resources to benefit people's livelihoods and promote development [1] - This process is also anticipated to release more credit resources to flow into the real economy [1]

Core Viewpoint - The People's Bank of China (PBOC) has reported significant increases in new loans and social financing in June, indicating a positive impact of monetary policy on the real economy [2][3]. Monetary Policy and Economic Impact - The PBOC's Vice Governor Zou Lan emphasized that the effects of monetary policy take time to manifest, and the central bank will continue to implement a moderately accommodative monetary policy to support economic growth [3][7]. - In June, new RMB loans reached 2.24 trillion yuan, an increase of 110 billion yuan year-on-year, while social financing amounted to 4.2 trillion yuan, up by 900.8 billion yuan year-on-year [2][3]. Financing Data Analysis - For the first half of the year, social financing increased by 22.83 trillion yuan, up by 4.74 trillion yuan year-on-year, with new RMB loans totaling 12.74 trillion yuan, an increase of 279.6 billion yuan year-on-year [2][4]. - Corporate loans showed a positive trend, with medium to long-term loans increasing by 40 billion yuan in June, ending a four-month decline, and short-term loans rising by 490 billion yuan [3][4]. Government Bond Financing - Government bond financing saw a significant increase, with net financing of 7.66 trillion yuan in June, up by 4.32 trillion yuan year-on-year, driven by a peak in government bond issuance [2][5]. - In the second quarter, government bond issuance accelerated, with a total of 7.2 trillion yuan issued, including 4.6 trillion yuan in central government bonds and 2.6 trillion yuan in local government bonds [5][6]. Money Supply Growth - As of the end of June, M2 money supply grew by 8.3% year-on-year, an increase of 0.4 percentage points from the previous month, while M1 grew by 4.6%, up by 2.3 percentage points [2][6]. - The growth in M2 is attributed to increased loans and social financing, alongside stable fiscal deposits compared to the previous year [6]. Future Outlook - Analysts expect that the measures implemented since May will accelerate and positively impact the demand for funds in the real economy, with stable growth in infrastructure investment and a gradual recovery in private investment [7]. - The continuation of government bond financing and the expected increase in new special bond issuance are anticipated to support social financing in the coming months [7].

1. Report Industry Investment Rating There is no information provided in the report regarding the industry investment rating. 2. Core View The report indicates that China's Q1 2025 economy exceeded expectations, with GDP growing by 5.4% year-on-year. Meanwhile, the European Central Bank cut interest rates by 25 basis points to address tariff impacts. The global economic situation is complex, with factors such as tariffs, inflation, and employment affecting different countries' economies [1][3][4]. 3. Summary by Directory 3.1 Economic Situation - **GDP and Consumption**: In Q1 2025, China's GDP was 31.8758 trillion yuan, growing 5.4% year-on-year. The total retail sales of consumer goods in Q1 were 12.4671 trillion yuan, a 4.6% year-on-year increase. In March, it grew 5.9% year-on-year, 1.9 percentage points faster than January - February [4][21]. - **Investment**: Q1 fixed - asset investment (excluding rural households) was 10.3174 trillion yuan, a 4.2% year-on-year increase. Excluding real estate development investment, it grew 6.3%. Infrastructure and manufacturing investments increased by 5.8% and 9.1% respectively [4][21]. - **Industrial Added Value**: In Q1, the added value of the equipment manufacturing industry increased by 10.9% year-on-year, and the high - tech manufacturing industry increased by 9.7% [21]. - **Exports and Imports**: In March, exports increased by 13.5% in RMB terms and 12.4% in US dollars. Imports decreased by 3.5% in RMB and 4.3% in US dollars. The improvement in March exports may be related to pre - export, and the future foreign trade situation remains severe [5]. 3.2 Social Financing and Credit - **Social Financing**: In Q1 2025, the cumulative social financing increment was 15.18 trillion yuan, with 5.89 trillion yuan in March, a year - on - year increase of 1.06 trillion yuan. Loans and government bonds are the main factors supporting social financing [35]. - **Credit**: In Q1, RMB loans increased by 9.78 trillion yuan, with 3.4 trillion yuan in March. The credit structure was further optimized, and the effective demand continued to recover [35]. 3.3 Inflation Indicators - **CPI**: In March 2025, China's CPI decreased by 0.4% month - on - month and 0.1% year - on - year. Food prices decreased by 1.4% month - on - month, affecting the CPI decrease [41]. - **PPI**: In March, the PPI decreased by 0.4% month - on - month and 2.5% year - on - year, mainly due to the decline in international commodity prices [41]. 3.4 Overseas Macro - **US Inflation**: In March 2025, the US CPI decreased by 0.1% month - on - month and increased by 2.4% year - on - year. Core CPI increased by 0.1% month - on - month and 2.8% year - on - year, still higher than the Fed's target [48]. - **US Employment**: In March, the US non - farm sector added 228,000 jobs, and the unemployment rate rose to 4.2%. The employment data was better than expected [49]. 3.5 Interest Rates and Exchange Rates - **Exchange Rates**: The RMB against the US dollar has shown two - way fluctuations. Recently, it was under pressure but remained within a range. Short - term risks include Fed policy divergence and geopolitical instability [56]. - **Interest Rates**: There are data on various interest rates such as DR007, SHIBOR, LPR, and government bond yields, reflecting the current interest rate situation [58].